The absence of a mechanism to permit so-called fiscal transfers within the 16-nation region may undermine the exchange-rate system, said Steve Barrow, head of Group of 10 foreign-exchange strategy at the bank in London. Concern some nations will need to be rescued may drive the premium investors demand to hold 10-year Greek debt instead of benchmark German bunds to 400 basis points next year, from 214 basis points today, he said. The Irish premium may also jump, he said.

“Countries like Ireland and Greece may not be able to grow out of the current crisis,” Barrow said in a telephone interview today. “With interest-rate cuts, exchange-rate depreciation and significant fiscal support all off limits for these countries, bailouts or even pullouts from EMU may happen next year.”

The Irish Finance Ministry called the suggestion it might leave the euro area “uninformed comment,” and Greece said there was no chance it would leave.

I have to agree with the Irish here – this is pure speculation of what may or may not happen months from now. I am fairly eurospectipal. But I tend to doubt stories like these because they are usually from an interested party talking his own book. The situations in Greece and Ireland are dire. But, c’mon. There are a lot of policy remedies that can take place before it reaches this point. And no one in government is talking about anything remotely as draconian as leaving the Euro. Moreover, going it alone is not without risks. Just ask Iceland.

Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty five years of business experience. He has also been a regular economic and financial commentator in print and on television for the past decade. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.

Saying it will happen, and saying it will happen next year are two different matters entirely. I’d feel comfortable saying that within 10 years some members will begin withdrawing from the EMU. And within 20, the EU will cease to exist. But trying to put such precise timeframes on enormous geopolitical events is unwise. These things rarely happen as quickly as anticipated.